RESEARCH OVERVIEW Natural Gas Service Group, Inc. (NGS)

Coverage Initiated: 06-02-05 @ $10.35 Current Rating:  6 Current 12-18 month Price Target: $24 Raised Price Target from $16.50 to $20.00 on 08-15-05 Decreased Rating from 4 to 2 (Stock Price $23.23) and Raised target from $20 to $28 on 11-22-05 Raised Rating from 2 to 4 and lowered Target from $28 to $24 on 6-2-06 Raised Rating from 4 to 6 on 06-15-06 (stock price $12.92).

Natural Gas Services Group, Inc. ("NGS") is a Midland, Texas based natural gas industry services company focused on the development, manufacturing and marketing of a handful of products critical to that theatre. These products include primarily natural gas compressors, both rotary screw and reciprocating natural gas compression equipment as well as flare systems in various configurations and with features that allow for the customization of those systems around customer needs.  In addition to these products, the company also performs maintenance services to users of gas compression and flare equipment. While the company sells both the compressors and flare products delineated above, their primary focus is in the leasing of their compression systems.  Due to the nature of these systems as well as the nature of the industry in general, leasing is often an optimal solution for many producers of natural gas, especially amongst those exploiting unconventional sources. On the other hand, the gas compression services industry in general, especially in the unconventional space, is quite fragmented as it is largely served by smaller players focused in relatively small geographic areas.  Consequently, an organization such as NGS, that can provide leased equipment in a timely manner across a broad geographic footprint may possess some inherent comparative advantages with respect to a number of variables vis-à-vis these smaller competitors. The domestic natural gas exploration and production ("E&P") industry has experienced a marked resurgence over the past few years.  This resurgence is the result of a number of factors.  In my view, the most important of these factors, albeit symbiotic in nature, include the following: " Increased domestic demand for natural gas. " Increasing prices for natural gas. " The nature of natural gas as a fuel and those implications on its supply/demand equations. " Technological advances which have allowed for the exploitation of once marginal properties, especially those containing unconventional gas formations. The issues above are driving demand for the products and services the company provides. There are additional, more specific elements to the story that make it compelling.  For example, while the company is beginning to see business from non-domestic portions of North America, the preponderance of its business is and will likely remain within the U.S.  At the same time, the large competitors in the space appear to be focusing their efforts away from small/medium size horsepower domestic markets in favor of international markets where larger, more complex (and more expensive) systems are in demand.   The fact that the international markets are drawing some of these competitors away from some portions of the domestic market, specifically those in which NGS is operating, is also quite topical to this story.  Again, many of the international markets are just beginning to build transmission infrastructures, which require large complex compression systems, which is why the big players in compression are looking in that direction.  As an example, the report contains some data, which suggest that two of the larger players in the space (Hanover and Universal) dropped about 50% more units in the sub-200 horsepower space in 2004 than I am projecting the company will add in 2005.  One could infer (although I submit not definitively) that NGS could make a business simply filling the void left by the changes in strategy of the large players in the industry. In my opinion, perhaps the best way to look at the NGS opportunity is as near pure play in the domestic natural gas industry without the typical risks associated with drilling dry holes.  Clearly, if my assessments of domestic gas supply/demand are accurate, then NGS should be positioned to take marked advantage of that trend.

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EDGEWATER RESEARCH PARTNERS LLC DISCLAIMER STATEMENT The information contained in this report has been written by David Lavigne of EdgeWater Research Partners LLC ("Edgewater") and has been derived from sources considered reliable, but cannot be guaranteed by us.  Edgewater and Lavigne are not aware of any material conflict of interest known at the time of the publication of this report.  Financial projections and estimates herein represent our independent analysis based upon information in conjunction with the Company's publicly available financial statements.  Edgewater and Lavigne may maintain positions in the securities referenced, which may change at any time without notice. Edgewater does not receive fees, warrants or any other compensation from issuers in connection with its research.  It does however, encourage issuers and it representatives to subscribe to Edgewater's research, and from time to time, issuers and or their representatives may also purchase individual copies of Edgewater's research products. Edgewater and Lavigne may own options, rights or warrants to purchase any of the securities of the Company.  This report is for informational purposes only and is not to be construed as specific investment advice or recommendations, nor as an offer to sell or a solicitation of an offer to buy any securities.  The securities referenced are speculative in nature and may not be suitable for your specific investment objective.  For specific investment advice or recommendations, please consult with your investment representative.

Issuer Purchase Disclosure As of this date, employees and or Directors of NGS have subscribed to 0 full annual subscriptions for Edgewater's newsletter and research information. In August 2005, Monarch Consulting, a company representing NGS in certain consulting capacities purchased from EdgeWater a license in the amount of $7,500 for the unlimited reproduction of the NGS Initial Coverage research report.  In October 2005, NGS paid a fee of $7,500 to attend EdgeWater's Fall 2005 Micro cap/ Small cap Conference for Investment Professionals".  The Company was unable to attend the conference and forfeited that fee.